Apr 02, 2024

Minimizing Estate Taxes and Effective Wealth Preservation Tactics for Your Estate Plan

When people think about working with an estate planning attorney, they usually think about making an appointment to get a particular document drawn up, such as a will or power of attorney. However, a comprehensive estate plan focuses much more on the desired management outcomes and strategies than the documents used to support those outcomes and strategies.

A dedicated estate planning attorney will work with you to discern all the tactics you can use to support your goals—not just those that involve writing up a legal document. In this post, we want to explore some of the steps you can take to preserve wealth and minimize estate taxes. Some of these steps are surprisingly simple to undertake, but they can lead to significant results in the long term.

Why It is Important to Pay Attention to Estate Tax Liability

Before going into the details about how to avoid estate tax and other factors that can deplete your resources, it may be helpful to understand what estate tax is and how it can affect your loved ones. An estate tax is a tax imposed when one person passes away and their assets transfer to someone else. 

In recent years, many people in California haven’t paid much attention to this tax because the state has not imposed an estate tax and the federal estate tax has only applied to those with estates valued at many millions of dollars. For 2024, estates worth less than $13.61 million are exempt from federal estate tax. However, the provisions that establish that exemption threshold are set to expire at the end of next year. After that, Congress could decide to raise tax revenue by lowering the threshold and subjecting many more people to the tax.

For that reason, it is a good idea to consider strategies to reduce the potential for estate tax liability, just to be prepared. Moving assets in a revocable living trust to avoid a probate estate will not help when it comes to estate tax because property in this type of trust is still considered part of the taxable estate. However, there are other ways to reduce or eliminate estate tax liability.

Gifting Strategies to Conserve Assets

Sometimes the best way to keep your assets is to give them away. More specifically, if you intend to leave money or other property to loved ones in the future, making regular gifts to them sooner rather than later can be an easy way to reduce the value of your estate and therefore reduce your estate tax liability. When gifts given over the course of a year exceed a certain threshold, those gifts can be subject to gift tax, so you may not be able to give out everything all in one year. That is why it is wise to work with your estate planning attorney and wealth advisor to develop a gifting strategy. Together, you can figure out amounts and timetables for giving that allow you to distribute wealth to loved ones without incurring gift tax and while still reaping the maximum benefits for estate tax reduction.

Gifts to charity can also be part of the gifting strategy. Many people plan to leave legacies in their will to support causes they cherish. However, making these gifts during your lifetime can not only reduce your potential for estate tax but also reduce income tax liability as well.

Trusts Can Be Used to Minimize Tax Liability and Preserve Wealth

While a revocable trust will not protect you against estate tax liability, various types of irrevocable trusts can remove property from your taxable estate and lower your potential tax burden. Trusts such as charitable lead trusts and charitable remainder trusts can provide support to loved ones while also benefiting your favorite causes. With a charitable lead trust, for instance, the designated charity receives income from the trust for a set period of time, and then the remainder is transferred to beneficiaries such as family members.

Talk to Blacksburg Law About Strategies to Reduce Taxes and Preserve Wealth

At Blacksburg Law, we focus on building plans that are designed to reach our clients’ goals with the greatest efficiency. We can help you maximize the legacy you leave for your loved ones, charitable causes, and others you wish to support. While the tactics described above work well for some people, your plan will be tailored to your specific situation, so it may be completely different. To discuss the strategies that may work best for you, schedule an appointment with our team today.  

What Happens to the Trust When I Die?

In many cases, people create trusts not to help themselves but to support their loved ones in the future. So, it’s only natural to question what happens to the trust when the creator is no longer living. The answer depends on the purpose of the trust. For a trust established to support a loved one

Guardian Nominations for Children Lawyer in California

When your children are the center of your world, it can be very hard to force yourself to consider what would happen to them if you were no longer able to care for them. However, you will never know true peace until you have a plan prepared for their future to protect them in case

Who Should Be the Trustee?

Whether you are forming a trust for the first time or making revisions in documents for an existing trust, it is a good idea to give serious thought to the choice of trustee. Selecting the right trustee will enable your trust to do what you intend and to protect and support loved ones. If you